The report points out that both rent and occupancy are good in most markets compared to history, “the homeownership premium is over $1,000 per month in most major markets, and lead traffic is starting to improve.
“While all real-estate sectors are going through a reset, we think multifamily will outperform, but there are some things to watch out for too,” Dane Drewry, Jesse McConnico, and Chris Montgomery, research analysts and consultants, write in John Burns newsletter.
Here are the 6 takeaways
Q4 2022: The market cooled, due in large part to massive rent growth of 14 percent YOY for those deciding to relocate (renewals were less).
January 2023: Apartment market is off to a strong start in 2023, thanks to pent-up demand to move and a ridiculously high premium to purchase a home.
Oversupply warning: More than 1.1 million apartments units are in the pipeline, which is far more than needed and will likely produce a supply surplus later in the year and next year.
Demand warning: Most apartment owners are planning on a recession later this year, which is never good for apartment owners.
Plunging values ahead: Cap rates have risen—but experts say not enough. Expect cap rates to rise and values to decline.
Controlling expenses: Most apartment developers are focused on improving efficiencies to combat increases in expenses.
The Risk Of Oversupply
“Despite the current delays, the number of completions will be greatly elevated through 2024. The massive apartment pipeline has led many to speculate about oversupply risk.
However, new supply will be largely concentrated in markets with stellar job growth and overpriced for-sale housing,” the authors say.
Conclusion: 6 takeaways from National Multifamily Housing Council Conference
The authors say that the current challenge is “how to successfully build and execute a strong strategy around the changing environment. To remain competitive, developers and operators will need to be hyper focused on where they are going and the game plan to get them there.”